Baseball Labor Relations: The Reserve Clause

This is the third part of our series on the negotiations taking place between MLB and the MLBPA. The outcome of these talks will shape the future of professional baseball, impact every team – including the Reds – and determine whether or not we fans face another work stoppage.

Part 1 - History of Collective Bargaining

Part 2 - The MLBPA and Marvin Miller

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When pro baseball started, players were paid on one-year contracts. At the end of each season, a player could switch from one team to another. It was common for organizations to lure players from their competitors. As you would expect, this practice led to higher player salaries. It also caused financial losses for teams, causing clubs to disband on a regular basis.

Boston Red Stockings owner Arthur Soden had a solution. Before the 1879 season, Soden had been spurned by two of his star players who had jumped from his team to Providence. After Providence won the next pennant, an angry Soden proposed each team be allowed to “reserve” five of its players, which was about half the team. Reserved players could not be poached by other teams. The six National League owners adopted Soden’s “five-man rule” in secret that winter.

The reserve clause was so attractive to owners, within a decade they had expanded it to all 14 players on their rosters. Arthur Soden’s rule was written into every player’s contract. It stipulated that if the player and team couldn’t reach an agreement on the player’s salary, the team could simply designate it. Players were all but forced to sign, a process repeated season after season. The rule proved to be an unbreakable rope that bound a player to his team – or one he was traded or sold to – for as long as the team wanted.

Player salaries fell, especially for stars. Team profits rose and franchises became more stable, both in terms of money and identity. Those were the twin goals of the reserve clause, after all.

But as new baseball leagues were formed – particularly the Federal League in 1913 – the National League and American League attempted to enforce reserve clauses and prevent players from jumping. That didn’t sit well with many of the players who were eager to escape and play for the new league.

So, players and the Federal League challenged enforcement of baseball’s reserve clause on the grounds that it attempted to enforce a monopoly, restrict interstate commerce, and therefore violated the Sherman Act, which Congress had passed in 1890.

But over a series of decisions, the U.S. Supreme Court held that the Sherman Act didn’t apply to baseball due to the sport’s local nature and only-incidental impact on interstate commerce. Later decisions reinforced that holding with the claim that if Congress had intended to cover baseball with the Sherman Act, they could have done so in an explicit way with legislation.

Baseball owners didn’t face another serious challenge to the reserve clause and their anti-trust exemption until 1969, almost ninety years after Soden’s five-man rule was adopted.

Curt Flood had been a star player for the Reds, Cardinals and Washington Senators. He was a three-time All Star, had won seven Gold Gloves and retired with a .293 batting average (102 wRC+). When the Cardinals traded Flood to Philadelphia after the 1969 season against his wishes, Flood refused to report. Looking back now, just not showing up seems crazy. But, Flood hadn’t signed a contract with the Cardinals for the 1970 season. St. Louis claimed the right to trade him because of the power of the reserve clause.

Flood’s resistance was occurring at the same time the MLBPA and Miller had emerged to negotiate a successful Collective Bargaining Agreement. Player understanding and assertion of their labor rights was growing. Flood took Major League Baseball to court, challenging the reserve clause and claiming the trade violated his basic rights as a citizen. The case reached the Supreme Court two years later.

By 1972, it had become clear that baseball was, in fact, interstate commerce. There were, after all, expensive national broadcast contracts, among other things. But the Court held (5-3) in Flood v. Kuhn, that its past precedents were still controlling. The reserve clause and baseball’s anti-trust exemption were upheld.

Curt Flood may have lost, but his case unified and emboldened the players behind their union and Marvin Miller. That year, the players had gone on strike over a dispute about their pension. They also were about to use their newly won right to arbitrate grievance procedures in front of a neutral federal arbitrator to test the reserve clause.

While Reds fans were watching the Big Red Machine win the 1975 World Series, pitchers Andy Messersmith of the Dodgers and Dave McNally of the Orioles/Expos were finishing a season playing without signing a contract. The two players had allowed their 1974 contracts to govern their 1975 employment, but by refusing to sign their 1975 contracts. So, they hadn’t agreed in writing to be bound by the reserve clause for the 1976 season.

Taking advantage of this clever loophole in the reserve clause, Messersmith and McNally went to arbitration and claimed they weren’t bound in 1976 by their 1974 contract. In December 1975, in what was the most important labor arbitration decision in sports, the players won a landmark grievance (named the “Seitz Decision” after arbitrator Peter Seitz) that undercut the reserve clause. Seitz ruled that a player became a free agent after playing for one season after his contract had expired. The district court and Eighth Circuit upheld Seitz’s ruling.

And just like that, the reserve clause had a gaping hole any player could exploit. Peter Seitz immediately paid for his decision with his job. Commissioner Bowie Kuhn fired him, saying Seitz could no longer be seen as a neutral arbitrator.

Yet his decision stood. Owners were shaken and knew maintaining a form of the reserve clause was fundamental to their economic well being. Since they could no longer simply dictate it to the players, they turned to the only path Marvin Miller and the MLBPA had left them – collective bargaining.

The high-stakes negotiation was intense. The owners proposed players could become free agents after ten years with a club. Reds catcher Johnny Bench was reported to have said in response, “How can you say a player must play ten years to be a free agent? Only four percent of all major leaguers ever play that long!”

The owners locked the players out for the first couple weeks of spring training. After 17 days, commissioner Bowie Kuhn ordered training camps open. The 1976 season started without at CBA. In July, MLB and the MLBPA reached an agreement reinstating a limited reserve clause. The negotiated deal stipulated players would earn free agency after accruing six years of major league service time.

The new limited reserve clause began as part of the 1976-1979 CBA and has remained in every subsequent agreement. Even today, players with fewer than six years of service time remain bound by Arthur Soden’s rule. Yet, free agency has forced baseball owners to share their ever-expanding revenues with the players whose talents, after all, are what excite fans and fill ball parks. The same is true in the other professional sports that followed baseball’s path.

Despite its long tenure in baseball CBAs, the possible modification of the six-year reserve clause is at the center of negotiations between the two sides right now.

We’ll look at that in an upcoming newsletter.

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